The S&P/ASX200 fell 33.6 points by midday, down 0.37 per cent, to 9,036.4, as the broader All Ordinaries dropped 30.6 points, or 0.33 per cent, to 9,243.6.
The dip followed a slump in global equity markets as bond market jitters re-emerged overnight.
"Rising bond yields weighed on asset prices around the world as investors became increasingly nervous about higher long-end rates," Capital.com senior market analyst Kyle Rodda said.
While the move was modest and eased through the US session, cross-asset price action was pointing to structural tensions in the markets bubbling to the surface again.
"While market participants have been willing to stomach the higher yields because the future returns are expected to be worth it, the rise in some parts of the curve to multi-year or multi-decade highs has shaken confidence enough to force a slight re-rating of stocks," Mr Rodda said.
Financial stocks weighed heavily, the sector down 1.2 per cent as CommBank led the big four banks and Macquarie lower.
Basic materials gained 0.4 per cent despite a slight down tick in BHP shares after Tuesday's post earnings rally, as Fortescue and Rio Tinto edged higher in-line with the copper price and iron ore futures.
Gold stocks were broadly higher as the precious metal found buying support near $US4,353 ($A6,153) an ounce.
Ongoing tensions in the Middle East continued to support oil prices, with Brent crude trading near $US92 a barrel, with no signs of progress to reopen the Strait of Hormuz shipping route.
The broader energy sector was up 1.1 per cent, led by Santos shares after the oil and gas giant lifted first-half production by three per cent and delivered sales revenue of $2.6 billion.
Health care was the third and final segment trading higher by lunchtime, up almost two per cent as CSL rallied for a second day after its well-received full-year results, which prompted an upgrade from investment giant Morgan Stanley.
In other earnings news, consumer cyclicals have tumbled for a third straight session, as Temple & Webster shares tanked more than 18 per cent, as weak consumer confidence weighed on its result.
Breville also sold off, its shares shedding more than six per cent despite recording growth across all major metrics, as US tariffs and the resulting relocation of manufacturing impacted earnings.
Stockland rocketed more than 12 per cent higher after its full-year statutory profit jumped by more than a fifth to $994 million.
The Australian dollar is buying 70.76 US cents, down from 71.01 US cents on Tuesday at 5pm.
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